Problemberta industries stock has a beta of 125 the company, Ask an Expert

Finance

Problem:

Berta Industries stock has a beta of 1.25. The company just paid a dividend of $0.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 5.8 percent. The most recent stock price for Berta is $75.

Required:

Question 1: Calculate the cost of equity using the DCF method.

Question 2: Calculate the cost of equity using the SML method.

Note: Please show how to work it out.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162571

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